Magic Merger?

February 20, 2004

Everybody knows that when a balloon gets blown up too big, it pops. That's an image called to mind over the megamedia merger proffered by the country's largest cable company, Comcast, to obtain entertainment giant, Disney.

Now the Federal Communications Commission (FCC) could have a ballooning problem on its hands - just how big is too big?

Disney's already rejected the $50 billion-plus offer, saying the bid undervalues the company. But Comcast is unlikely to give up. If a deal is eventually struck, the new entity would become the world's largest media corporation, ousting Time Warner, which has held the biggest record for just over two years.

Yet the FCC, under Michael Powell, has pushed for, and gotten, more relaxed media ownership rules from Congress. And the recent FCC-approved merger of DirecTV with Rupert Murdoch's media conglomerate helped open the regulatory way for this possible deal: That merger was conceptually similar.

No wonder Comcast is interested in Disney, which owns ABC, ESPN, and 10 TV and more than 60 radio stations. Cable subscriptions are static. The deal would give Comcast enough new cable channels to make it more competitive with satellite TV - and perhaps allow it to drop rival Time Warner's channels from its lineup. But it could also charge higher rates, leaving the consumer in both a viewing and monetary lurch - especially if the merger costs Comcast more than Disney is actually worth.

The FCC's Powell is right to say the merger will be thoroughly vetted. Many of the issues that the FCC considered in the DirecTV/Murdoch merger will resurface. But because of the ever growing size of these mergers, the questions should be replayed: Just what constitutes too much control of the nation's broadcast outlets? How might original programming be hindered? Could independent cable operators and locally produced network broadcasts be jeopardized? What's the likely cost impact on the consumer? Would competition with satellite services remain viable?

This might seem like a merger rerun, but it's actually a sequel that needs close attention.